gains tax and the executor
25/08/2006 The Sun - Law & Realty By Yang Pei Keng
The real property gains tax (“gains tax”) is a form of tax that you have to
pay when you sell any landed property, for example, a residential house, a
shophouse (including a shoplot, an apartment and a flat). No gains tax is
payable if you buy a landed property.
In other words, the Real Property Gains Tax Act 1976 (the “RPGT Act”) only
applies to the sale, but not the purchase of any landed property.
The executor is the person (named in a will) who administers the estate
(that is, the property) of a deceased.
RPGT introduced in 1975
No gains tax was payable up to the end of 1975. It was introduced by the
RPGT Act on 7 November 1975
The RPGT Act was enacted to replace the Speculation Tax Act (since
repealed). The Speculation Tax Act was supposed to be a temporary measure to
fight speculation in landed property during the boom period in the
It was found to be a good source of revenue. The RPGT Act was then passed to
perpetuate the tax on sale of land in the form of gains tax. Gains tax has
since been payable for the past 30 years.
Date of acquisition
There are numerous aspects of the RPGT Act that need to be discussed. In
this article, only one of the aspects is touched upon, that is, the date of
acquisition of the property.
In order to compute any gains tax payable on the sale of a property, one has
to ascertain the date of acquiring the property, that is, the date of
Generally, the date of acquisition is the date the property was bought.
However, in certain cases, the date of acquiring the property may not be
that easily ascertained, for example, the date of acquisition by an executor
of the estate of a deceased person.
Date of acquisition by executor
An executor does not acquire the estate of the deceased in the strict sense
of the word. He does not acquire any interest in the property belonging to
the estate of the deceased. He is merely an agent holding the property on
behalf of the estate of the deceased, pending distribution of the property
to its beneficiaries.
He may sell or dispose of the estate of the deceased before distributing it
to the beneficiaries. The question is: What is the “date of acquisition” of
a property by an executor (or an administrator), bearing in mind that he did
not buy the property, but the deceased bought it.
The man in the street may take the date the deceased purchased the property
as the date of acquisition by the executor. However, it is not so. The law
has arbitrarily fixed the date of acquisition by an executor.
Date of death of the deceased
The RPGT Act takes the date of death of the deceased to be the date of
acquisition by the executor, that is: date of death of the deceased = date
of acquisition by executor.
The actual date the deceased bought the property (which could be many years
before his death) is not to be taken into account, even though the executor
steps into the shoes of the deceased when managing the deceased’s estate.
The date of death of the deceased is deemed to be the date of acquisition of
the executor. This was the result of an amendment by the Finance Act (No.2)
1985, s39(g) to the RPGT Act. It took effect on 1 January 1986. A new
paragraph 15B(1) was added to Schedule 2 of the Act:
“15B(1) Where an asset of a deceased person is disposed of (otherwise than
to a legatee i.e.beneficiary) by his executor ..., such executor ... shall
be deemed to have acquired it on the date of death of the deceased person."
According to this paragraph, the executor is taken to have acquired the
property on the date of death of the deceased. The actual date the deceased
bought the property is irrelevant. It may be much earlier than his date of
death. An illustration may help:
In 2000, the deceased bought the property. In 2005, the deceased died. In
2006, the executor sold the property.
In the illustration given, the executor is deemed to have acquired the
property in 2005 when the deceased died, but not in the year 2000 when he
actually bought the property. The actual date the deceased bought the
property was not taken into account.
The executor sold the property in 2006. He has to pay gains tax at the rate
of 30% of the gain. That is the highest rate of the sliding scale of gains
tax payable when a landed property is sold one year after the death of the
For example, if the gain in disposing of the property was RM100,000, the
gains tax payable would be RM30,000.
If the date the deceased bought the property is taken into account, no gains
tax is payable, since any sale of property after 5 years (2000 -1006) is not
subject to gains tax.
Is the provision introduced to frustrate any attempt by the beneficiaries to
avoid payment of RPGT by way of selling the property of the deceased before
the distribution of the estate to the beneficiaries concerned?
Date of transmission to executor
There is another point which is worthy of note. When the property was
transmitted (i.e. 'transferred') into the name of the executor, the date of
transmissioin is not taken as the date of acquisition of the executor
either, if he sells the property.
The writer is a member of the Conveyancing Practice Committee, Bar Council